1. Field of the Invention
The present invention relates to a system and method for controlling the cash value growth of an insurance policy.
2. Description of the Related Art
Life insurance policies are often purchased by companies for different purposes. For example, a company may purchase life insurance policies for its employees as a benefit of their employment, with death benefits going to the employees' beneficiaries. A bank may purchase life insurance policies on its borrowers with death benefits going to the bank at levels sufficient to cover the outstanding mortgage amounts.
Typically, companies also use the life insurance policies as an investment vehicle. Thus, present systems attempt to maximize positive cash value growth ("CVG"), thus increasing the cash value, of the policies (as used herein, CVG is the difference between the cash value and basis of the insurance policy). In some situations, however, large positive CVG can adversely affect a company's liquidity, and investment and business options due to regulatory limitations and business concerns. For instance, banks have regulatory limitations on the amount of investment they can have in life insurance. Thus, if a bank has a number of life insurance policies to cover a given number of borrowers, as the CVG increases, the bank may have to cover fewer borrowers to remain in regulatory compliance.
Another disadvantage of large CVG is that if borrowers prepay their mortgages, the bank may want to exchange the insured of the life insurance policies covering the original borrowers to new borrowers. Large CVG may have a significant adverse financial impact on the bank when it effects these exchanges.
Accordingly, there is a need for a system to manage the CVG of life insurance policies and to ensure that the insurance policies remain in regulatory compliance.